Research Papers – Distribution Marlboro Products

Writer and Editor:

TANHAEI, ERFAN

Submitted to:

Professor Marthinson Villanueva

Distribution and Channel Management – MGT176

Mapua University – ETYSBM

July / 2019
 EXECUTIVE SUMMARY

World ‘s best-selling cigarette brand (300 bill. units sold in 180 countries) world ‘s most

profitable non-durable consumer good flagship brand of Philip Morris, the world ‘s

largest cigarette manufacturer.Most Valuable Brand in the World“ (Interbrand ranking

2011, net value: 20 bill. $) most recognized and appealling brand image of the 20th

century.

Brand was founded by Philip Morris in 1924 initially meant for women. Over the period

of time, it has been repositioned as a masculine brand in 1950 which helped the brand

in increasing its sales. Marlboro distributes its cigarettes through its common

distribution channel which has a wide and deep reach in the markets and is a key

strength of the company. It sells its products in more than 180 around the world via the

different channel of distribution such as retail outlets, e-commerce sites, distributors,

Pops & mum stores etc.

Marlboro is brand of Phillip Morris International, PMI and in India it is manufactured by

Godfrey Phillips India (they have tie up).

 COMPANY BACKGROUND

Marlboro

History of the “Marlboro” brand of cigarettes

Marlboro is the largest selling brand of cigarettes in the world. It is made by Philip Morris

USA (a branch of Altria) within the US, and by Philip Morris International outside the US.

It is famous for the “Marlboro Man” of advertisements.

The brand is named after Great Marlborough Street, the location of its original London

factory. Richmond, Virginia is now the location of the largest Marlboro cigarette

manufacturing plant.

Philip Morris launched the Marlboro brand in 1924 as a woman’s cigarette, based on the

slogan “Mild As May”. In the 1920s, advertising for the cigarette was primarily based

around how lady like the cigarette was. To this end, the filter had a printed red band

around it to hide lipstick stains, calling it “Beauty Tips to Keep the Paper from Your Lips”.

It faced trouble in the 1930s and attempted to rejuvenate itself with a clever advertising

gimmick, changing the ivory tip to red in order not to smear ladies' lipstick.

The brand was sold in this capacity until World War II when the brand faltered and was

temporarily removed from the market. At the end of the war, three brands emerged that

would establish a firm

hold on the cigarette market: Camel, Lucy Strike, and Chesterfield. These brands were

supplied to US soldiers during the war, creating an instant market upon their return.
After scientists published a major study linking smoking to lung cancer in the 1950s, Philip

Morris repositioned Marlboro as a men’s cigarette in order to fit a market niche of men

who were concerned about lung cancer, but not wanting to admit it. At the time, filtered

cigarettes were considered safer than unfiltered cigarettes, but had been until that time

only marketed to women. Men at the time indicated that while they would consider

switching to a filtered cigarette, they were concerned about being seen smoking a

cigarette marketed to women.

 Marlboro cigarettes packs

Varieties of Marlboro Cigarettes:

 Marlboro Reds (Full Flavor): Kings, 100s and 72 mm box

 Marlboro Medium: Kings and 100s

 Marlboro Lights: Kings, 100s, and 72 mm box

 Marlboro Ultra Lights: Kings and 100s

 Marlboro Menthol: Kings,100s, and 72 mm box

 Marlboro Menthol Lights: Kings and 100s

 Marlboro Menthol Ultra Lights: Kings and 100s

 Marlboro Menthol Milds: Kings,100s, and 72 mm box

 Marlboro Blend 29

 Marlboro Wides

 Marlboro Filter Plus

Marlboro Reds

 Marlboro Full Flavored cigarettes, or Marlboro Reds as they are commonly known

because of the red crest on the white pack, are the original Marlboro cigarette and still

the most recognizable. They are available in king size (the standard cigarette size) and

in 100s (a slightly thinner, longer cigarette).

 Marlboro Mediums

 Marlboro Medium cigarettes were created to form a middle ground between Marlboro

Reds and Marlboro Lights. They have the same signature Marlboro tobacco blend but

with slightly less tar and nicotine than the Reds. They are marketed in a white pack with

a smaller red Marlboro crest than Reds. They are available in king size and 100s.

Marlboro Lights

 Marlboro Lights feature the same tobacco blend as Marlboro Reds but with less

concentration of tar and nicotine. Marlboro Lights come in a white pack with a gold

Marlboro crest. Lights are available in king size and 100s.

Marlboro Ultra-Light

 As a concession to rising health concerns, Marlboro developed an Ultra-Light brand.

Just like the Light cigarette, it features the same blend of tobacco as the Full Flavored

Marlboros but with even less tar and nicotine. Ultra-Lights come in a white pack with a

silver Marlboro crest. Ultra-Lights are available in king size and 100s.

Marlboro Menthol

 Marlboro also markets cigarettes flavored with menthol. These are marketed in white

packs with green detailing and are available in Full Flavored and Light variations.

Marlboro Smooth
 Marlboro also markets a second brand of nicotine cigarette with a different flavor blend.

They are marketed in a pack with a blue Marlboro crest. Full Flavor king size cigarettes

are on the market

DISTRIBUTION SYSTEM MARLBORO

DISTRIBUTION SYSTEM

A proper distribution system is very important for every company because now a days

the customer wants full service without any pain.Marlboro has a deep penetration in the

market due to its availibilty and it has provided them a advantage in the market. I have

also seen in the market the happy faces of customers and retailers of marlboro because

of the easy availability of marlboro cigarettes.

BENEFITS OF GOOD DISTRIBUTION SYSTEM

1. Easy availability

2. Satisfied customers

3. Competitive advantage

4. Better market reputation

5. Saves time

DISTRIBUTION SYSTEM OF MARLBORO

1. Organisation (C&FA's)

2. Distributor

3. Retailer

4. Customer
 Organization

DISTRIBUTOR

Supermarket Department Stores E Tailers

CUSTOMER
 Channel Structure:

MARLBORO CIGARETTES

Manufacturing unit

Warehouses

Distributors

Product Area Distributor

Dealer

Retailer

Customer
2. The Marlboro Distribution Network

Intensive Distribution

Intensive Distribution for marlboro. This is the ideal strategy for the market leader as

intensive distribution has the following advantages:

 Increases coverage and sales

 Increases product availability

 Encourages retailers to compete aggressive. Higher competition leads to

narrower margins for the retails hence, increases the ultimate margin for

the manufacturer.

The Channel Members of the Distribution Network of marlboro

The marlboro distribution network for biscuits has essentially four levels as enlisted

below:

 Wholesalers and Distributers

 Carry Forward Agents (if required)

 Retailers

The Channel Members and Logistics

m has nearly 1500 wholesalers, catering to 425000 retail outlets directly or

indirectly. A two hundred strong dedicated field force services these wholesalers

and retailers. Additionally, there are 31 depots and Carry and Forward agents

supplying goods to the wide distribution network.

The Retailers

 Trade schemes: . company raises the margins by 2%, also schemes like good

packaging incase of butter and cheese is undertaken by the company.

However this is only a short-term initiative to push the products of the

company.

 Glow boards: the company puts up glow boards at the retailer and pays the

major portion of the cost.

 Schedule of the salesmen: they provide the retails with this schedule so the

retailers can pre-estimate the quantities of the various products needed.

 Infrastructure facilitation: the company facilitates the retailers to buy

beautiful stalls by formulating an easy payment program and a commitment to

buy back the equipment at a reasonable price when the value of the equipment

has depreciated.

Evaluation of the Channel Members

MARLBORO has a three pronged process to evaluate its channel members.

These are the Beat Plan, the Cumulative Performance plan and Target versus

Achievement Plan.
 Beat plan: this plan is generated for the various product categories. A

weekly schedule is prepared for various markets and the retailers the

turnover for each of the product is calculated for the wholesale dealers.

 Cumulative performance: the performance of the dealers is averaged out

over a period of three years where a comparison is made of the present

performance vis-à-vis the previous ones.

 Target versus achievement: the performance and the targets are

compared and therefore the gaps are identified which help in evaluating the

wholesalers and the distributors and planning for the next year as well. This

is done for each of the product category.

 Other criteria: these need to be fulfilled by the channel members of

MARLBORO.

 Details of the bank guaranty

 Photographs of the offices

 Details of the wholesalers and the distributors‟ salesmen and the

product lines they deal in.

 The computerization facility available.

 The storage space.

 Stall facility with photograph.

 Details of the delivery vehicle with photograph.

  Summary of the monthly potential sales of markets.

 Summary of the product wise monthly sales potential of institutions.

CONFLICTS AND CO-OPERATION

 Ownership of assets: Previously the company used to give the products

on lease to the retailers, when the company wanted the stuff back; the

retailer disagreed to comply and created issues of ownership.

 Stocking issues: The company doesnt want the retailers to stock the

competing brand in the company leased stall, which at times s hard to

manage as retailers tend to do it often.

 Replacement of products: The deterioration in the product calls for fail in

replacement by the company this major issue of vertical conflict.

 Credit policy: Compared to the market, the company‟s credit period is

less that specially in case of institutional sales is very important.

Margins: The Company provides least margins to all the channel

members. For e.g. The retailer’s margin in case of MARLBORO is

1.45%
 PEST Framework for the cigarette industry

Political- Strict rules & regulations related to advertising, age etc

Economic- Cigarettes, Tobacco products can fair the Economic recession

Social- Acceptance in society decreasing, cognitive dissonance, negative association

Technological - Important to develop manufacturing facilities, product innovation etc.

 Porter’s Five forces (PF5) analysis for Cigarette industry

Bargaining power of buyers –High (Lot of competitors with similar options)

Bargaining power of suppliers – Low (Paper, Tobacco used for cigarette manufacturing

are simple commodities

Threat From substitutes - High (Availability of substitutes like bidis, snus etc.)

Current category rivalry- Very High (Differentiation largely by branding, distribution)

Threat of New Entrants – Low to moderate (Maturing Market, distribution problem,

punitive legislations etc.)